Market prices are set by energy retailers in the same way many other businesses determine the prices they charge, considering the costs of providing the service and the need to be competitive.
Retailers market their offers to the consumers who can choose the offer they want according to their own needs, entering into a contract agreement with their existing retailer or a new retailer. The prices, fees, and other terms of these contracts are not regulated, and may be lower or higher than the regulated prices.
The NSW Government operates NSW Energy Switch, which is a free online website to make it easier for customers to find the best prices. The Australian Government’s Australian Energy Regulator (AER) also operates a free electricity and gas on-line price comparison service Energy made Easy, which enables consumers to compare offers from different energy retailers to find the one that best meets their needs.
Each year IPART is required to monitor the competitiveness of the gas and electricity markets. When competition is working well, if a retailer increases its prices above the costs of supply, then they will be outcompeted and lose customers to other retailers.
IPART makes recommendations to the NSW Government on gas reticulation licences and we monitor and enforce compliance with licence conditions.
In NSW, about 25% of the typical gas bill covers the cost of extracting and producing gas. The majority of the gas supplied to small consumers in NSW is natural gas sourced from domestic conventional gas fields.
Once the retailer has bought the gas you need, it is transported to your home or business through transmission and distribution pipelines. The retailer pays the gas transmission and distribution businesses for the amount of gas that they deliver via their pipelines. This makes up about 55% of your final bill.
Making all of this happen and managing your account costs the retailer money as well, so 20% of your bill covers their costs.
On your gas bill you’ll see fixed supply charges and usage charges. The fixed charge includes some of the costs of pipeline and retail operations. The usage charge is based on how much gas you use. This usage charge generally includes the costs of gas extraction and production, transmission and distribution costs, and retail costs. The amount you pay for these elements increases as you use more gas.